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The Impact of Selling the Federal Helium Reserve
THE IMPACT OF SELLING THE FEDERAL HELIUM RESERVE
Committee on the Impact of Selling the Federal Helium Reserve
Board on Physics and Astronomy
Commission on Physical Sciences, Mathematics, and Applications
National Materials Advisory Board
Commission on Engineering and Technical Systems
National Research Council
NATIONAL ACADEMY PRESS
Washington D.C.

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The Impact of Selling the Federal Helium Reserve
NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study by the Board on Physics and Astronomy and the National Materials Advisory Board was conducted under contract number 1422-N66-C98-3002 with the Department of the Interior. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organization or agency that provided support for the project.
International Standard Book Number 0-309-07038-4
Copyright 2000 by the National Academy of Sciences. All rights reserved.
Available in limited numbers from:
Board on Physics and Astronomy
2101 Constitution Avenue, NW
Washington, D.C. 20418
202-334-3520
Printed in the United States of America.

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THE NATIONAL ACADEMIES
National Academy of Sciences
National Academy of Engineering
Institute of Medicine
National Research Council
The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences.
The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering.
The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine.
The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council.

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The Impact of Selling the Federal Helium Reserve
COMMITTEE ON THE IMPACT OF SELLING THE FEDERAL HELIUM RESERVE
ROBERT RAY BEEBE,
Tucson, Arizona,
Co-chair
JOHN D. REPPY,
Cornell University,
Co-chair
ALLEN M. GOLDMAN,
University of Minnesota
HERBERT R. LANDER,
Boeing/Rocketdyne
MOLLY K. MACAULEY,
Resources for the Future
MARK A. MILLER,
University of Texas at Austin
ADAM Z. ROSE,
Pennsylvania State University
THOMAS A. SIEWERT,
National Institute of Standards and Technology
ROBERT M. WEISSKOFF,
EPIX Medical, Inc.
DONALD C. SHAPERO, Study Director
ROBERT M. EHRENREICH, Senior Program Officer (until February 26, 1999)
KEVIN D. AYLESWORTH, Program Officer (as of September 7, 1998)
DANIEL F. MORGAN, Program Officer
Liaison Representatives
ROBERT DOYLE,
U.S. Department of the Interior, Bureau of Land Management, Washington, D.C.
TIMOTHY SPISAK,
U.S. Department of the Interior, Bureau of Land Management, Amarillo, Texas
MICHELLE J. CHAVEZ,
U.S. Department of the Interior, Bureau of Land Management, Amarillo, Texas

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Preface
In 1996 the U.S. Congress passed the Helium Privatization Act (P.L. 104-273), which ordered the Department of the Interior to begin liquidating the U.S. Federal Helium Reserve by 2005 in a manner consistent with "minimum market disruption" and at a price given by a formula specified in the act. Helium is a rare and nonrenewable resource, however, with many properties critical to a number of important technologies in the commercial, military, and fundamental scientific research sectors. Unlike ordinary goods and services that can be produced virtually forever, every unit of helium that is produced and consumed today will eventually escape Earth's atmosphere and become one less unit available for use tomorrow. The prospect of liquidating the U.S. Federal Helium Reserve is thus a matter of great concern in the commercial, academic, and government sectors. In response to this concern, the Helium Privatization Act also mandated, in Section 8, that the Department of the Interior "enter into appropriate arrangements with the National Academy of Sciences to study and report on whether such disposal of helium reserves will have a substantial adverse effect on U.S. scientific, technical, biomedical, or national security interests."
This report is the product of that mandate and was conducted by a committee, the Committee on the Impact of Selling the Federal Helium Reserve, convened under the auspices of the Board on Physics and Astronomy and the National Materials Advisory Board of the National Research Council (NRC), which is the operating arm of the National Academy of Sciences and the National Academy of Engineering. Nine committee members (none of whom are in the helium supply business) were carefully selected by the NRC to provide a suitable range of expertise and an appropriate balance of experience in helium usage, helium-based research and development, and resource economics. To provide a meaningful context for this effort, the committee examined the helium market and the helium industry as a whole, in order to determine how the users of helium would be affected under various scenarios for selling off the reserve within the constraints set forth in the pertinent legislation. The committee did not assess the pricing

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strategy spelled out in the legislation because that issue lies outside of its charge. Specifically, the committee's task incorporated the following elements:
Identify the major current applications of helium in the scientific, technical, biomedical, and national security communities. Determine how much helium each consumes and of what purity.
Assess whether these applications are likely to grow or shrink over the next 10 to 20 years. Identify any important new uses of helium that can be foreseen over the same period in the user communities being considered.
Identify any alternatives to the current use of helium in each application above, including conservation, recycling, the use of different purity grades of helium, and the substitution of other materials or other technologies.
Examine how the above users currently pay for the helium. Assess the flexibility of the funding sources and the price sensitivity of the demand for the various uses.
Assess the current and projected U.S. market for refined helium, including worldwide helium demand by industrial and other users as well as the users identified above. Examine the availability and reliability of worldwide supply, technical opportunities to increase that supply (e.g., improved recovery), and the relationships among supply, demand, and market price.
Assess the economic implications of the sales method prescribed in the legislation.
Develop several scenarios for how the federal helium reserve might be sold, including both full and partial privatization and considering various approaches to the sale, such as futures, incentives, and market timing.
Under each scenario, determine the likely impact on the cost and availability of helium for the scientific, technical, biomedical, and national security uses examined above.
Under each scenario for price and availability, assess how access to helium would be affected for users in these communities.
Synthesize the results of all the above to assess the impact of the sale of the reserve on helium users in the scientific, technical, biomedical, and national security communities. Present several options for accomplishing the sale, with an analysis of each option's advantages and disadvantages for the user communities being considered.
Suggest ways in which the federal government or others could mitigate any adverse impacts that are identified for each option, by financial mechanisms, by advancing the technology for helium production, recovery, conservation, and recycling, or by other means.
To accomplish its task, the committee collected information from four main sources:
A site visit by several committee members to the Federal Helium Reserve in Amarillo, Texas, including an extensive briefing session from the technical staff, an inspection of the reserve facilities, and a town forum, in which members of the local community could make statements and ask questions of the committee members;
Meetings by several committee members with helium industry personnel, including a site visit to the ExxonMobil facilities in southern Wyoming;

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A supplier workshop, in which members of the Helium Advisory Committee of the Compressed Gas Institute briefed the committee on the nature of the helium gas fields, the private helium extraction and purification industries, and the private helium distribution industry; and
A user workshop, in which representatives of the major users of helium briefed the committee on such areas as fuel-tank purging, leak detection, welding, production of fiber-optic cable, nuclear power generation, magnetic resonance imaging, and fundamental scientific research. The fundamental scientific research session was organized by the American Physical Society.
In each of the cases, the committee permitted the main communities to organize their own briefing sessions. The agendas of the four meetings of the committee, the third of which included the user's workshop, are presented in Appendix A.
The committee's deliberations are organized in six chapters. Chapter 1 provides an overview of the properties that make helium unique and a history of helium's discovery and usage. Chapter 2 details the contents of the federal legislation and the capabilities of the U.S. Federal Helium Reserve in Amarillo, Texas. Chapters 3 and 4 provide overviews of helium demand and supply respectively. The economics of the helium market are reviewed in Chapter 5, and the committee's findings and recommendations concerning the potential long-term consequences of the sale of the Federal Helium Reserve are discussed in Chapter 6.
Robert Ray Beebe and John D. Reppy, Co-chairs
Committee on the Impact of Selling the Federal Helium Reserve

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Acknowledgments
The committee would like to thank the following people for their support of this project and for ensuring that the committee had prompt access to all of the information it required: Robert Doyle of the Department of the Interior's Bureau of Land Management (BLM), Timothy Spisak of BLM, Carl T. Johnson, president of the Compressed Gas Association, and Robert Park of the American Physical Society. The committee would also like to thank Arthur Francis of AWF Consulting, who provided comprehensive briefings and valuable insight into the history and development of the Federal Helium Reserve.
Thanks are also due to the following people for providing briefings and/or insight into this study: Morris Aizenman, National Science Foundation; Tim Brennan, University of Maryland; D. Allan Bromley, Yale University; Terry Byrd, Bureau of Mines; Phillip Eckels, General Electric; Tom Elam, NASA; Robyn Faifer, Kelly AFB; David Farson, Ohio State University; Gary Ferguson, Oxford Instruments; Douglas Finnemore, Iowa State University; Henry Galpin, Pioneer National Resources USA; Don Gubser, Naval Research Laboratory; Michael Harrison, Brookhaven National Laboratory; Mark Haynes, General Atomics; Siu-Ping Hong, Lucent Technologies; George Hyde, ExxonMobil Company; Peter Koch, State University of New York at Stony Brook; Phil Kornbluth, BOC Gases; Thane Kraus, Ridgeway Petroleum; William Moyer, Air Products and Chemicals, Inc.; Gerald Nalepa, Air Liquide America Corporation; Douglas Osheroff, Stanford University; John Pilot, Intel; Douglas Rasch, ExxonMobil Company; Claus Rode, Jefferson Laboratory; Ron Sager, Quantum Design; Sharon Saupp, Praxair, Inc.; Hans Schneider-Muntau, Florida State University; Eric Stangeland, Boeing; Barbara Stauder, Praxair, Inc.; Elie Trak, Hypres Digital Electronics; Scott Walston, GE Aircraft Engines; David Wolff, MG Industries.
The committee also thanks BPA staff members Kevin Aylesworth and Donald Shapero and National Materials Advisory Board staff members Robert Ehrenreich and Daniel Morgan.
Finally, the co-chairs of the committee thank the committee members for their dedication and patience during the course of this study. It could not have been completed without their diligence and goodwill.

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Acknowledgment of Reviewers
These proceedings have been reviewed by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council's (NRC's) Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the authors and the NRC in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The contents of the review comments and the draft manuscript remain confidential to protect the integrity of the deliberative process. The committee wishes to thank the following individuals for their participation in the review of this report:
P.W. Anderson, Princeton University,
Edward Dowling, Cleveland Cliffs, Inc.,
Howard Hart, General Electric (retired),
Larry Lake, University of Texas at Austin,
J. Ross Macdonald, University of North Carolina (emeritus),
William D. Nordhaus, Yale University,
Doug Osheroff, Stanford University,
Christopher Sims, Princeton University, and
John Tilton, Colorado School of Mines.
Although the individuals listed above have provided many constructive comments and suggestions, the responsibility for the final content of this report rests solely with the authoring committee and the NRC.

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